DIRECT GETS RESPECT

For most agency executives, that's the stuff of nostalgia. But it's business as usual at direct agencies. The discipline-once the Rodney Dangerfield of the industry-is finding new vibrancy in a world where accountability and alternatives to traditional advertising are becoming more crucial to marketers from American Express to Procter & Gamble, Unilever and Mazda.

"It's an exciting place to be," said Howard Draft, CEO at the Interpublic Group of Cos. shop that bears his name. Draft has boosted U.S. staff 15% to 1,210 since July 2003.

"Exciting" is rarely mentioned in the same breath as direct marketing. But consider the figures: Marketing-agency revenue derived from direct initiatives-including direct mail, telemarketing, direct-response TV and e-mail-hit an all-time peak of $2.87 billion in 2003, up 15% from the prior year and a hair above the $2.79 billion mark in 2000, according to Ad Age estimates. Meanwhile, advertising and media revenue slid 2.7% to $10.05 billion in 2003, below the 2000 peak of $10.43 billion, the figures show. Sales promotion, interactive and public relations also came in below their 2000 peaks.

And at a time when budgets are shifting out of traditional media-advertising and media represented 49% of the overall revenue mix in 2003, compared to 51% in 2001-direct's share of the overall marketing pie is steadily growing. Direct represented 14% of the total in 2003 compared to 13% in 2002 and 12% in 2001, the Ad Age numbers show.

shifting channels

Growth like that is powering agencies such as Rapp Collins, Wunderman, Digitas and Draft. And agency holding companies are giving direct new respect. Interpublic executives pointed to Draft's performance as a factor in improved second-quarter results. "It's an area of growing importance to us," said CEO David Bell.

WPP wants to boost revenue from measurable marketing services, including direct, to 50% of revenues from a third, according to the shareholder letter in its 2003 annual report. The reasoning? Clients "don't like to make intuitive decisions," said Chief Executive Martin Sorrell.

Indeed, as consumers shun traditional mass media, marketers need to shift channels. And with budgets under scrutiny and return on investment the watchword, companies are increasingly favoring quantifiable marketing tactics like direct.

As a result, direct marketing's role is growing in shaping clients' strategies, and it's drawing the attention of more senior-level executives at marketers. "We're now talking to [CEOs and CMOs] about the impact of direct and relational marketing" rather than brand or channel managers, said Ricardo Zane, senior VP-managing director in the New York office of Publicis Groupe's Arc Worldwide, Chicago.

Moreover, categories beyond the industry's stalwart financial services, travel, telecom and automotive are increasingly getting more direct. That includes pharmaceutical and package-goods players. Pfizer, working with Wunderman, touts its drugs and provides health tips to baby boomers in its "Pfizer for living" online and mail direct campaign.

Mazda has boosted its direct-marketing efforts over the past three years and the discipline is now an integral part of every model's pre-launch program, said Eric Johnston, marketing director of Mazda North American Operations. "We use it to kick-start sales" of models and to build awareness, he said.

To better harness its customer information, the automaker consolidated three databases into one. "The main benefit is we know a customer's history and then we can be predictive by using modeling for how to best communicate with them," for a future purchase.

The automaker also uses direct tactically. It just sent a total of 400,000 communications via e-mail and regular mail to existing Miata owners offering a special deal to purchase a new MazdaSpeed turbo-engine Miata.

Most Procter & Gamble Co. home-care brands have used at least some direct-response TV in the past year, and even some beauty and personal-care brands, such as Olay and Crest, have tested it. P&G is using DRTV, generally offering high-value coupons of up to $5, to buy such products as Swiffer Wet Jet or Mr. Clean Auto Dry car-wash kits, which retail for around $20.

"Having the [direct-response] vehicle at the end helps in some of these cases where there's a hurdle that people have to cross in terms of the price they have to pay," said Colleen Jay, VP-North American home care and global strategic planning for P&G.

Direct is also on the rise as marketers use increasingly sophisticated databases and analytic tools, and the Internet provides a new platform to interact with consumers. "We have the tools to target," said Amanda Kelly, director-relationship marketing for Unilever North America. Unilever sends out Home Basics, a magazine that contains articles highlighting its household brands and coupons.

increasing integration

Direct is increasingly being integrated with measured media. The U.S. Army's "Army of One" campaign, handled by Publicis' Leo Burnett USA and Arc, drives potential recruits to goarmy.com to get more information. Fallon Worldwide, Minneapolis, worked with Wunderman so Citibank's "Live Richly" campaign message would "percolate" throughout all marketing tactics, said Rob White, president of Fallon's Minneapolis office.

Marketers, moreover, are getting more creative in using direct. Burger King Corp. is both using and parodying direct in advertising for the Angus burger with a direct-response TV spot and infomercial this week promoting a phony Angus Diet book written by the fictitious Dr. Angus. The 60-second spot and five-minute infomercial created by Crispin, Porter & Bogusky, Miami, will run on Spike TV and Comedy Central, including an authentic toll-free phone number (866-EAT-ANGUS) and Web site to process book "orders." Each execution includes disclaimers that the $29.99 book "as seen on TV" can be downloaded for free.

Marketers are also discovering the cost benefits of driving volume with existing customers vs. acquiring new ones. According to the Direct Marketing Association, 55% of marketers sent e-mail to customers in 2003 vs. 43% for prospects.

Still, some of the oldest forms of direct remain the largest, according to figures from the DMA. Telephone marketing makes up the biggest slice of that, or 39%. It's followed by direct mail, which makes up 24% of the total.

But as the industry puts the "You may already have won!" stereotype far behind it, direct marketers are expanding into other media. Radio and TV both grew by 5.5% annually for the five years ended in 2003, according to the association. TV represented 11.9% of 2003 outlays and radio represented 3.7%. "Other," which includes the Internet, grew at a 3.7% rate and stood at 7.9% of 2003 spending, according to the DMA.

There are speed bumps ahead for the industry, as the very thing that makes direct efficient-razor-sharp targeting-also raises privacy concerns. "Technology is helping people amass great amounts of data and manipulate it," which opens the door to potential misuse, said Wayne Madsen, a senior fellow at the Electronic Privacy Information Center, a privacy-advocacy group. "In the past there was a lot of data around but ... the technology wasn't there." While the DMA has privacy standards and guidelines, Mr. Madsen contends self-regulation is a "placebo."

An even bigger threat for the industry is growing restriction against direct-marketing messages. As the registries demonstrate, plenty of people are sick of intrusive marketers-and Washington is listening.

Ian Volner, an attorney who practices direct marketing and telecom law at Venable and represents the DMA, doesn't expect outright prohibitions of direct-marketing practices because of First Amendment issues.

`do not annoy me'

But the states and federal government could intervene in other ways. For example, a recent California law compels state-based companies, if asked, to tell people who gave them their name. Mr. Volner said other states likely will follow California's lead.

"There are going to be continuing quasi do-not-annoy-me pressures in the industry and they're going to have to deal with that," he said. "They need to target more carefully and pay attention to ethical guidelines."

Moreover, marketers will have to find ways to cut through a glut of messages. "Clutter is here to stay," said Daniel Morel, CEO of WPP's Wunderman. "The way to fight clutter is to [respond] with great creative."

The holy grail for some now is to find ways to get consumers to come to them instead of vice versa-with the opt-in becoming more crucial as media clatter grows louder.

To do so, marketers are eyeing search-engine marketing tactics, including paid search and search-optimization tools. They're also exploring branded-entertainment strategies to attract consumers to visit Web sites. For instance, American Express Co. posted a Web film of Jerry Seinfeld hanging out with Superman. Digitas designed the URL and created interactive elements that enabled AmEx to pull data from visitors; WPP's Ogilvy & Mather, New York, created the ad.

The challenge is "to get the consumer to go first," said David Kenny, CEO of Digitas. "It's becoming C to B [consumer to business]."